TSLA Buys Bitcoin, Dogecoin Frenzy, Russell Up > 10% Last 6 Sessions, TWTR Earnings Preview

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I’ve been doing this since 1978 and this is the wildest cocktail I’ve ever seen – Stan Druckenmiller, Goldman Sachs Interview, Friday January 29, 2021

The biggest story in financial markets Monday was Tesla (TSLA) buying Bitcoin. In their 10K, they wrote that sometime in 2021 they had acquired $1.5 billion in Bitcoin and were free to acquire more if they so choose.

With Bitcoin currently trading ~$46k that means that TSLA’s announcement has driven it up ~$7k in a 24 hour period to new ATHs.

Not content to drive up Bitcoin, TSLA CEO Elon Musk has been busy pumping Dogecoin on Twitter. It started with a Thursday January 28 tweet of a magazine that looks like Vogue but is instead called Dogue with attending articles on doges.

He has continued to pump it since, pushing up the satirical cyrptocurrency from ~1 cent to ~8 cents as his 46+ million Twitter followers have rushed to buy the coin in the wake of his tweets. I have no idea why he’s abusing his power like this. Dogecoin was created as a joke in 2013 according to its creator Billy Markus who told the WSJ: “The idea of dogecoin being worth 8 cents is the same as GameStop being worth $325. It doesn’t make any sense. It’s super absurd. The coin design was absurd” (“Elon Musk’s Dogecoin Tweeting Has Believers Barking For More”, Paul Vigna and Caitlin Ostroff, WSJ B1, February 8 [SUBSCRIPTION REQUIRED]).

While cryptocurrencies were the leading story yesterday, the stock market continued its torrid 6 day run. The Russell 2000 index of small caps continues to lead +2.53% yesterday, +6.00% in the last 3 sessions and +10.4% in the last 6. It is now +131% since March 19, 2020 and 92% of its components are trading above their 200 DMAs.

The best word that describes what we’re seeing in financial markets right now is “surreal”. It’s hard to believe and get one’s mind around. Nevertheless, let’s try and stay somewhat anchored to reality by previewing Twitter’s (TWTR, market cap $47 billion) earnings this afternoon. TWTR grew revenue 13.7% in 3Q20 and earned 4 cents Diluted EPS. They reported losses in both 1Q20 and 2Q20 due the pandemic so let’s give them the benefit of the doubt and use 2019 results. Giving TWTR credit for its more than $4 billion net cash on its balance sheet, its Enterprise Value (EV) to 2019 Diluted EPS ratio is 171x and EV to 2019 sales 12x. Now, while I expect a good quarter as people seem to be flocking to TWTR, that valuation is absolutely absurd. Nevertheless, TWTR is trading at 7 year highs.

Posted by Greg Feirman  ·  Trackback URL  ·  Link